The Life of the Party – Feb. 23, 2026

Life insurance companies have gotten more active in CRE lending and a little farther out on the risk spectrum

At the Mortgage Bankers Association’s 2026 Commercial/Multifamily Finance Convention & Expo in San Diego earlier this month, the overarching sentiment was that “the commercial real estate finance market has turned a corner,” Slatt Capital’s senior leadership told Connect CRE. “Originations are projected to rise 27% to $805.5 billion in 2026, approximately $875 billion in commercial mortgages are set to mature this year, and capital is abundant.” 

A notable sign of the uptick in CRE financing activity is the more aggressive stance life insurance companies have assumed. Always among the more conservative classes of lenders—as demonstrated by their ranking at the bottom for mortgage delinquency rates—life companies increased their CRE deal volume by 23% in 2025, according to preliminary MBA figures. 

This year, “life company allocations are up significantly, with some preparing to deploy up to twice their 2025 capital,” according to Slatt Capital CEO Dan Friedeberg, president Michael Kaplan, COO Jason Berry and managing director, loan servicing Elizabeth Burnett. 

“Spreads have tightened, and to maintain yield, many are showing increased flexibility in CM2 loan structures”—i.e., loans at high credit quality, rather than the highest. In addition, life companies have been deploying bridge capital “to drive short-term yields while securing permanent placements.” Insurers have also gotten more active in non-traditional asset classes, from student housing to cold storage, they pointed out. 

In a sector report issued while the MBA convention was underway, Moody’s Ratings noted the increased willingness of life companies to delve into somewhat riskier loans. “U.S. life insurers are largely invested in higher quality CMLs [commercial mortgage loans],” the report stated. “However, in the past five years, as real estate valuations have declined in an elevated interest rate environment, there has been a slight deterioration in holdings of loans in the highest credit quality mortgage loan category, CM1, and an increase in CM2 and CM3 category loans, respectively, which carry higher risk charges.” 

Accordingly, Moody’s noted “an increase in foreclosures and a surge of restructurings” as CML quality gradually deteriorated during 2024. “To address these issues, in the past few years, insurers have proactively worked with borrowers to refinance upcoming maturities, and in the past year, insurers have been more flexible and have restructured more loans than in prior years.” 

As further evidence of life companies’ willingness to wade a little deeper in the risk pool, Moody’s pointed to a rapid increase in their exposure to residential mortgage-backed loans. “Allocations to residential-backed assets continue to grow through both direct lending and private credit structures, and this category is now approaching 4% of invested assets,” according to Moody’s. 

On the face of it, this increased exposure isn’t a higher-risk bet, provided the residential mortgages fall into the “insured/guaranteed” category. “Insured/guaranteed residential mortgages have lower capital charges than commercial mortgages because they carry lower risk,” Moody’s reported. 

However, the rating agency noted that private credit investors—including life companies—have to consider risk factors that accompany their increased participation in residential mortgages. These factors include loan characteristics, deal structure, veracity and documentation tenure, collateral and key parties involved in areas such as loan sourcing, servicing and maintenance.  

“Another feature of residential mortgage investments that life insurers have to consider is prepayment and extension risk: lower interest rates could trigger higher than originally anticipated levels of loan prepayments and higher rates could lead to lower levels of prepayments,” Moody’s reported. “The risks are less pronounced for non-agency than agency MBS. However, if mortgage rates drop sharply over a short time, surging prepayments as mortgage borrowers seek to refinance the loans backing these mortgage bonds could lead to asset-liability management mismatches in U.S. life insurers’ investment portfolios, especially when paired with products such as fixed annuities.” 

That being said, life companies in general have a longstanding reputation of conservative lending on conservative terms. One reason for this lengthy track record is that CRE lender and CRE borrower each provide something that the other needs: a lender offering fixed-rate, non-recourse terms and certainty of execution; a borrower whose loan payments offer predictable long-term income. If recent years have seen life companies willing to grant loans to sponsors with slightly less than top-tier credit, it’s safe to assume they have considered the risks and how to manage them. They are in the insurance business, after all.